Financial planning added to CIFPs E&O coverage

(February 9, 2004) Fee-based financial planners will now be eligible for errors and omissions insurance (E&O) coverage under the terms of the Canadian Institute of Financial Planners’ (CIFPs) new E&O policy.

The ACE-INA policy, revealed last week, has two categories — one for transaction-based planners and one for fee-based planners, says CIFPs managing director Keith Costello.

“If 75% or more of your business is sales, you go into the transaction plan, less than that you’re fee-based,” Costello says.

“We now have full coverage for fee-based planners, which is a big step for us,” he adds. “Some people couldn’t join us because of that.”

Financial planning is commonly excluded in many E&O plans in the wake of some steep losses internationally.

To secure coverage for fee-based planners, CIFPs had to educate the provider as to what services would be covered, Costello says.

“Once they understood that only people with a CFP designation were doing this, with ethics and practice standards behind then, they were a lot more confident these people would be professional and not prone to E&O claims.”

Costello says although the E&O market has improved slightly of late, getting coverage, especially for new organizations, remains a challenge. He notes that the Institute of Advanced Financial Planners — promoters of the R.F.P. designation — has been unable to arrange E&O coverage for its members. “For new organizations and new plans, it’s still pretty tough,” he says.

Costello believes the expanded plan will bring in new members for the CFP-exclusive CIFPs. “It’s critical for us, because a lot of former [Canadian Association of Financial Planners] members wanted to come over but they needed E&O, so they couldn’t. We hope to attract a lot more of them to the organization.”

CIFPs currently has about 1,300 members, a number Costello hopes to boost to 2,000 within six months.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com